Directors and Officers Liability for Nonprofits
We live in a highly litigious society. As nonprofits struggle to recover after the economic downturn, any claim or lawsuit, whether true or not, could be detrimental to their organization. It is particularly essential to protect the directors and officers of the organization with a comprehensive D&O insurance plan.
Officers and directors of a nonprofit board have a unique responsibility to their institution that typically goes beyond the usual board/company relationship. They have a mission and a special, often personal duty to advance the goals of the institution. With that personal association is added risk.
According to the American Bar Association, the federal Volunteer Protection Act provides limited immunity for volunteers (of tax-exempt and certain other nonprofit organizations). Directors and officers do not have the same immunity. A board member can be subject to allegations of wrongful conduct. Whether they are true or not, directors and officer on nonprofit boards face substantial liability exposure. Although some state and federal immunity statutes may protect directors and officers, such statutes do not provide for the cost of defense and may not always be available.
Directors and officers insurance can help protect the directors and officers of your nonprofit organization. It should provide coverage to cover both defense costs and liability exposure.
Nonprofits have a unique focus and special vision that falls to the responsibility of the directors and officers to carry out. Accusations of misconduct, whether true or not, can have a damaging effect on your reputation and a potentially damaging financial effect on your organization. Directors and officers insurance can help protect board members and the nonprofit in the event that they do face any claims or lawsuits.